While there is a ton of research explaining how insider transactions can help investors in predicting stock moves in the right direction, the whole idea is fairly intuitive. Who else would have a better picture of a company’s future prospects and its problems than the management itself. Hence, insiders are already trading on more information than is available to other market participants. With this in mind, we usually keep a close eye on these transactions and our radar has shown some important acquisitions by insiders made yesterday, including companies like Dollar Tree, Inc. (NASDAQ:DLTR), HORSEHEAD HOLDING CORP. (NASDAQ:ZINC), and Performance Sports Group Ltd (NYSE:PSG).
As far as the hedge fund sentiment is concerned it is not strongly bullish for any of these companies, at least in terms of the action during the second quarter is concerned. However, these new insider purchases might be preceding a change in sentiment.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read more details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 118% and beating the market by more than 60 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise (while avoiding their high fees at the same time) rather than large-cap stocks.
A director on Dollar Tree, Inc. (NASDAQ:DLTR)’s board, Lemuel Lewis, acquired some 3,700 shares at $66.8 per unit. So far this year, Dollar Tree, Inc. (NASDAQ:DLTR)’s stock has declined by 3.23% and slumped considerably earlier this week after the company’s second-quarter results missed both the top and bottom line estimates. However, the company was upgraded to ‘Buy’ from ‘Neutral’ by Bank of America earlier today, which supports the bullish signal from the insider. Among the funds we track, Charles Akre‘s Akre Capital Management is the largest stockholder of Dollar Tree, Inc. (NASDAQ:DLTR), owning more than 3.55 million shares valued at $280.53 million as of the end of June.
Next in line is HORSEHEAD HOLDING CORP. (NASDAQ:ZINC), whose President and CEO, James Hensler, purchased some 7,500 shares yesterday at a price of $7.54 per unit, taking his total holding to about 300,800 shares. Hensler also bought some 5,000 shares of the $405.14 million producer of zinc- and nickel-based products in May. HORSEHEAD HOLDING CORP. (NASDAQ:ZINC)’s stock has dropped by 55% so far this year, but the company’s latest financial results were strong, with both earnings and revenue topping the estimates. The stock’s depreciation could be linked to the general aversion of investors for the commodity-related stocks, which have been hammered given the low prices and uncertainty regarding the global growth, especially in light of the slowdown of the Chinese economy. However, based on cheap valuation metrics, which show the company trading at a forward earnings multiple of 11.92, the insider purchase makes a lot of sense. Monish Pabrai’s Dalal Street is the largest stockholder of HORSEHEAD HOLDING CORP. (NASDAQ:ZINC), among the investors that we track, as it holds more than 6.33 million shares valued at $74.23 million, according to its latest 13F. On its heels is Jonathan Savitz’s Greywolf Capital Management, which increased its holding by 31% during the second quarter to 4.72 million shares.
Amir Rosenthal, President at Performance Sports Group Ltd (NYSE:PSG) purchased 15,000 shares of the company at $12.75 per unit, increasing his stake to 46,604 shares. The stock of the manufacturer of sports equipment and related apparel has fallen by more than 17% since the beginning of the year, mainly affected by a big slump in August. Moreover, Wunderlich recently has reiterated its ‘Buy’ rating on the stock, but revised down the price target to $15 from $22. Amy Minella‘s Cardinal Capital is the largest shareholder of Performance Sports Group Ltd (NYSE:PSG) within our database and raised its holding by 2% during the April-June quarter to 742,209 shares.